Inside A $50M Trump Project That Failed: Starring Ivanka and Don Jr.
Reprinted with permission from ProPublica.
In November 2007, The Wall Street Journal infuriated Donald Trump with an article that dissected his recent real estate setbacks. Headlined “Stalled Condo Projects Tarnish Trump’s Name,” the report raised doubt about what the mogul treasured — and banked on — most in business: the value of his personal brand.
Trump responded with a 512-word letter to the editor. Calling the story “one of the most ridiculous I have read in many years,” he complained that it ignored his “tremendous successes with massive projects” and instead focused on “small jobs” in the Florida cities of Tampa and Fort Lauderdale. He dismissed both as licensing deals “for which I am not responsible for development.”
Trump’s reaction offers another capsule of his habit of twisting the truth regarding his real estate deals — one of the patterns revealed in a recent ProPublica and WNYC investigation, “Pump and Trump,” which focused on a deal in Panama. That article concluded that, contrary to the Trumps’ longtime claims that they merely licensed their name, they were deeply involved in their deals.
A trove of until-now unreported emails from inside the Trump Organization, unearthed during a lawsuit against the company filed after the Tampa project collapsed — the building was never constructed — sheds light not only on a U.S. Trump project, but also provides a rare glimpse inside the organization. (The suit, filed by people who had paid deposits in advance to buy condo units, was eventually settled, with the buyers receiving partial refunds of their deposits.) The documents provide copious detail on one of the “small jobs” that Trump would later claim he had merely lent his name to. And they reveal the same patterns of behavior seen in “Pump and Trump.”
The patterns include the Trump Organization’s decision to team with an inexperienced group of developers — led by a former professional wrestler, in this instance — who planned to construct a 52-story tower on a parcel that they belatedly discovered couldn’t support such a structure without millions of dollars in extra work. The patterns also involved false statements by Trump claiming he had an ownership stake in the development. And they included Trump’s claims that the project was sold out — which were contradicted by a letter in which he notified the developers that they were in violation of their licensing agreement because they had sold less than 70 percent of the units. Finally, there were hefty potential fees for Trump, a beneficial insider deal for his son and plenty of evidence that the Trump Organization’s involvement — including failed efforts to rescue the development — extended far beyond the use of the Trump name.
The Trump Organization did not respond to a detailed list of questions provided to it, nor did a White House spokesperson.
In an interview, the lead Tampa developer, Jody Simon, said of Trump, “I don’t blame Donald for the demise of the project.” He attributed its eventual failure to weakness in the real estate market at the time. Still, Simon said of the Trumps: “If everything’s going good, everybody wants a piece of it. If it goes bad, they don’t know anything.”
The Tampa project began, as did many Trump endeavors, with improbable partners: five Tampa-area businessmen eager to develop a 1.5-acre downtown site they owned. The group’s managing partner was Simon, a burly retired professional wrestler with a shaved head who had brawled under the name Joe Malenko and drove a Rolls-Royce. After retiring from the ring, Simon had launched, and sold, a successful medical-education company with his partner Frank Dagostino, a second member of the developer group. The three others were a local builder and a dentist who’d partnered with a real estate broker. The five men incorporated as SimDag/Robel LLC. Collectively, they’d developed some strip shopping centers and condo projects. None had ever built anything approaching a 600-foot tower.
A New Jersey real estate broker named Roman Osadchuk introduced them to executives at the Trump Organization in May 2004. From there, things moved rapidly.
As they did in such deals, Trump’s team negotiated upfront fees in return for licensing his name. The final terms: $4 million (to be paid in monthly installments), as an advance against 50 percent of all project profits. The Trump Organization, it would turn out, did not vet the developers closely. But the company was strict in one respect: It insisted that the developers personally guarantee the licensing fees.
Trump’s involvement wasn’t limited to selling his name. The licensing agreement gave him “review and approval rights” for virtually every aspect of the project. It required physical delivery to the Trump Organization of “all plans and specifications” for building design, engineering, floor plans, fixtures, lighting, exterior landscaping, and all sales and marketing materials — even the location and layout of the sales office. All were subject to “written confirmation that they comply with the Trump Standards,” an issue on which Trump himself would be the “sole judge.” The Trump Organization was to have access to the property and all project records at all times.
But first, there was the matter of the name. The Florida developers had been referring to the building, planned to rise along the Hillsborough River, as the “Tampa Riverside Plaza” project and were considering new versions in the vein of the “Trump Riverside” or the “Trump Tampa Riverside.” Trump quickly scuttled those ideas. “He strongly prefers Trump Tower Tampa,” Trump Organization executive vice president Russell Flicker told them, according to one of the emails that Trump’s company provided in litigation. And so it would be.
By early October 2004, the developers and the Trump Organization had worked out a contract. “I think we’re going to sign the deal this Thursday or Friday,” Flicker advised the Trump marketing chief, Jill Cremer, on Oct. 5. Flicker also relayed plans for a key part of the signing process: “you and I will go in together when we sign the deal to bring DJT the check, etc.” (Spelling and punctuation have been rendered as they appear in the original emails.)
After the papers were signed on Oct. 27, the Trump team and the developers began making plans for the promotional rollout, which would include, as with all Trump’s projects, taping an exultant video. As Cremer explained in an email to the Tampa team, “He has always accommodated us on these things in the past, although only for no more than about 30 minutes (he is very quick!)”
This would happen on Jan. 10, 2005, at 9:30 a.m., Cremer advised New York executives, including Donald Trump Jr., in an email: “Jody Simon and his partners on the Trump Tower Tampa project will be here to meet with Donald and ‘symbolically’ sign the agreement for photo-op purposes. This will take approximately 15 minutes.”
The Trump marketing machine kicked into action. “It’s a great honor for me to be involved with building what I think will be the greatest building in Florida, and it’ll be right in Tampa,” Trump declared in the 58-second video. “I have the finest partners you can imagine. They’re looking only at quality … It’ll just be a spectacular building — and the tallest building around! … You will love Trump Tower Tampa!”
The $220 million tower was touted in a press release as a “Donald J. Trump Signature Property” — an “ultra-luxury” building featuring concierge and valet services, a fitness center and spa, a fine art collection, and “imported marble floors with inlaid onyx highlights.” Its 190 condos would command prices ranging from $700,000 to more than $6 million.
In February 2005, Trump appeared in Tampa, on one of his two contractually required all-expenses-paid marketing visits. (Maximum length: six “working hours.”) He arrived in a black limo with his new wife, Melania, sweeping into town “like a crown prince,” as a story in the St. Petersburg Times (which has since changed its name to the Tampa Bay Times) described it. Greeted by Tampa’s mayor, Trump was the showcase attraction at a gala marketing event for more than 600 invitees.
Spurred by excited belief in Trump’s Midas touch — and about his personal commitment to the Tampa project — reservations for the condos, requiring a 10 percent refundable deposit, were going fast. Trump said that 98 percent of the 190 units had been reserved even before he touched down in Tampa, according to a St. Petersburg Times article at the time, and he had more than a hundred “backup” reservations.
In his letter to The Wall Street Journal, Trump would assert the Tampa building ultimately “sold out.” That statement was false. Court documents show only 109 of the tower’s reservations (57 percent of the building) turned into actual sales.
Those sales were achieved with the help of some deception about Trump’s financial involvement. During his February 2005 appearance in Tampa, he told the St. Petersburg Times reporters that he already held “substantial” equity in the project and wanted to boost his stake, but his partners wouldn’t let him because “when they’re selling that well they don’t let you do that.”
In truth, Trump hadn’t invested a dime — a fact he was keeping secret, with the help of a strict confidentiality provision in his licensing agreement, which barred anybody in the project from revealing Trump’s lack of equity.
Trump also said his son Donald Jr., who would emerge as a point man on the deal for the Trump Organization, was buying a unit in the building.
Donald Jr. would indeed make plans to jointly buy one unit with three Trump Organization colleagues — on sweetheart terms not offered to other buyers. They got a discounted price, a reduced down payment (5 percent) and the right to sell before the building was completed, according to emails that emerged in litigation. The Tampa developers helped arrange a sale that was to net the three insiders a quick $200,000 profit; emails show the two sides also discussed backdating paperwork to assure the gain would get favorable tax treatment. (Ultimately, the project failed before Donald Jr. and his colleagues could make any profits, the emails suggest.)
But those plans — and many others — ran into obstacles. Construction, scheduled to start in the spring of 2005, still hadn’t begun by early 2006, spurring rumors that the project was in trouble. The developers offered reassurances. Buyers who dropped out had been replaced “within hours,” one of the partners told the Tampa Tribune. “We’re absolutely going to build this building.”
That was less than certain. In testing the ground at the site, the developers had discovered the terrain was too soft to support a 52-story building without tens of millions in extra foundation and design work. In March 2006, the project’s general contractor, a prominent national firm, dropped out.
Meanwhile, the developers still hadn’t found the $200 million in financing the project desperately needed, even though Trump, during his Tampa visit a year earlier, had told a reporter “we have banks fighting over this project.”
The project was facing a financial squeeze. As a result, the developers began to miss some payments to the Trump Organization. In May, marketing executive Cremer had to pester one of the developers, Dagostino, for $64,091 in overdue licensing payments. “I’m hiring you as my ‘collector,’” Trump general counsel Bernie Diamond emailed her, when the money was on its way. “And you didn’t have to break his knee caps.”
“Yeah!” Cremer responded. “And he is even Italian!” (When reached by phone and asked about the Tampa project, Dagostino replied: “I’m not opening that can of worms. I have absolutely no comment. I went through enough agony through all this.”)
One potential lender after another dropped out. A Chicago bank that had loaned to another Trump-branded project demurred because the developers hadn’t sold enough condos to meet the bank’s financing standards. The Trump Organization monitored the situation closely. At one point in 2006, Diamond advised Donald Jr., Ivanka and Cremer that Deutsche Bank is “the only game in town.” But that didn’t come together either.
In August 2006, Donald Trump began to publicly express anxiety about the project, telling a reporter “this is the only job I have in the world that isn’t going up quickly.” Another sign of his concern: He reversed his previous position that he had an ownership stake and disclosed that, in fact, he merely had a licensing deal. Trump announced he was considering a buyout of the Tampa developers’ interest to rescue the situation. “I could build that [tower] out of my back pocket,” he boasted to the Tampa Tribune. “This isn’t a big job for me.” He also insisted he could easily find financing. “Banks love me,” he said.
After reading that article, Cremer emailed Andrew Weiss, the Trump Organization’s longtime executive vice president for development and construction: “Bernie and I need to discuss our Tampa project with you. DJT wants to buy out the job from the developers. Long story, but we need to do our due diligence…”
“Why do I get the feeling that nothing good will come of this?” Weiss replied.
Trump’s deputies began gathering cost data on the project. But by late August 2006, there was another option. The developers had approached the Related Group, a prominent Miami developer that had built other Trump-branded Florida condo towers, about taking over the Tampa project.
Eric Fordin, the Related executive evaluating the situation, had gone to college with Dagostino of SimDag. He quickly concluded they were in far over their heads. “Frank had no business doing a 50-story tower on a property with terrible soils,” Fordin testified later in a deposition for a lawsuit brought by angry condo buyers. “My first trip to Tampa, I was there for five minutes and told him he was never going to finish the project; he was never going to deliver the project on time.”
By the fall of 2006, estimated costs were soaring toward $300 million. Two general contractors had dropped out. Liens were being filed for millions in unpaid bills. And more than 40 percent of the condos remained unsold, after dozens of buyers had canceled their reservations and pulled out. The projected completion date had slipped into 2009.
Related proposed tough terms to rescue the venture, including a provision that would eliminate the Trump Organization share of the profits and replace it with a fee for each condo unit sold.
Donald Trump Jr., 28 at the time, was furious.
“I hate related,” he wrote a Trump Organization colleague on Sept. 9, 2006. “this is b/s. I do not think we could have been more clear with these assholes less than 3 weeks ago and they are already back to the flat structure nonsense and connot consider giving trump a piece of the backend,” he vented to in-house attorney Diamond. “They must think we are the dumbest people on the fucking block.”
On Sept. 11, Donald Jr. emailed his brother Eric, his sister Ivanka and seven other company executives, calling for an “all hands on meeting” to decide what to do. “We have some very important decisions to make regarding the outcome of this job,” he wrote. Taking over the project was one option. As a second, Donald Jr. wrote, “we have to assess the related offer which I hate, but it would be better than a failure if the numbers do not make sense for us.”
There were larger considerations to weigh, Donald Jr. noted. “I cannot stress enough the importance of not having any failures this early in the process of building up the licencing model,” which had emerged as the Trump Organization’s strategy.
Bad publicity was another. Forbes magazine was preparing a cover story on “The Real Apprentices” — how Trump’s children were faring as his prospective business successors. A failed deal on their watch would damage the narrative.
Wrote Donald Jr.: “With the Forbes piece underway and prob on stands in the next few weeks we will be under scrutiny more than ever and this presents us the opportunity to not only salvage a bad press situation but to potentially turn it inot a great thing for tyhe model if it makes sense. I.e. Trump saves the day…we will however have to do some real number crunching to see if it is in fact viable.”
On Oct. 2, Diamond emailed Ivanka that “either we swallow hard on the License Fee or take over the job, the latter being the least desired alternative.”
Ivanka, who had just turned 25, had another idea. She began talking up the Tampa deal to Wood Partners, a Georgia development firm she was working with on a massive planned “Trump Towers” project in downtown Atlanta. (That development never became a reality.)
On Nov. 10, 2006, Ivanka emailed her brothers and other Trump executives that partners from the Atlanta firm were coming to New York. “They want to discuss taking over the Tampa job,” she advised. “We have to give them a strong sell about how terrific this job is and that the only reason it is failing is due to the inexperience of the developers.” She did not mention that the Trump Organization had chosen to work with these inexperienced developers.
But this pitch would go nowhere, and by early 2007, the Tampa developers had begun getting letters from lawyers representing condo buyers, threatening to sue unless they were released from their contracts and given their deposits back. The developers responded by writing purchasers — “Dear Trump Tower Unit Buyer” — offering excuses and inducements (such as paying interest on their deposits) to try to keep everyone on board. Buyers started filing suits.
Still, there were moments of levity between the developers and the Trump Organization even as the pressure mounted. In April 2007, Simon, the developer and former wrestler, emailed Trump Organization lawyer Diamond after a call with a potential investor whom they were jointly wooing. “I told him to get off his ass soon and spend some warm and fuzzy time with you on the phone,” Simon wrote. “He promised he would, but we’ll see….I may eventually have to reenact my own version of SmackDown here in Tampa. You want to be my tag team partner? Have you ever donned tights?”
Despite Donald Trump’s public talk, his organization made no move to invest in the troubled project bearing his name. Its efforts to help SimDag find a lender had gone nowhere.
To Donald Jr., dealing with Related now seemed a palatable option. He emailed his siblings and other company executives: “we need to get this signed soon the longer it hangs out there with the press of buyers trying to pull out the less likely [Related] will sign on.” Ivanka followed up with an email on April 16 to Related’s CEO: “Is there someone on your team that I should contact directly to try to wrap up a deal?”
That same day, Trump sent a notice to the Tampa developers, advising them that they were $903,637 behind in their licensing payments, and in default of the licensing agreement for failing to sell at least 70 percent of the condo units within 30 months and start construction within 18 months. Trump threatened to yank their rights to use his name on the building.
With the broader real estate market also deteriorating, Related executive Fordin grew more skeptical. In a May 7 memo, he wrote that Trump Tampa “has evolved from a ‘joint development’ opportunity into a ‘distressed play’ opportunity.”
By May 25, the Tampa developers had fallen more than $1 million behind on their licensing payments. That day, Trump filed suit in federal court against people he had previously described as “the finest partners you can imagine.” He also pulled his name from the project. With the lawsuit, he included a copy of his licensing agreement, including a confidentiality clause barring anyone — “under any circumstances” — from even revealing the deal’s existence. (The suit was later settled on confidential terms.) This was the first many Tampa buyers learned that Trump had no equity in the project, but had merely sold use of his name.
Prospects for salvaging the project were fading fast. In late May, a SimDag executive had emailed Related’s Fordin, raising the prospect of selling the 1.5-acre site for “roughly $25MM.”
“You guys cannot be serious,” Fordin replied. “Nobody in their right minds are going to give you anything close to that number.” Fordin listed seven reasons, including litigation, the soil problems, an “all fucked up” building design, and “you have lost the Trump name.”
In the months that followed, a member of the Tampa group periodically called or emailed the Trump Organization, informing the company of yet another new hope to attract financing — and then get Trump “back into the deal.”
“Any news re the supposed financing etc.???” Donald Jr. asked his colleagues in early August.
“None,” Diamond replied.
Desperate, SimDag paid a $150,000 commitment fee — presumably for a loan of up to $200 million — to a purported “faith-based” lender named Providence Funding, run by Byron Levon Canada, who masqueraded as a priest and had served time in federal prison for fraud. The $200 million never materialized. (SimDag later sued Canada, who denied wrongdoing in his legal pleadings; the case was settled.)
Finally, in June 2008, the Trump Tampa Tower developers put the project into bankruptcy. Called for comment at the time, Donald Trump told a local reporter that he wanted to step in to save the project, but insisted his licensing agreement made that impossible. (That impediment was never mentioned in the internal Trump Organization documents.) The project’s failure, Trump declared, was “a real shame.”
But apparently those sympathies didn’t extend to the Tampa developers. In total, they had paid approximately $1.8 million in licensing fees to Trump, court records and documents show. Still, in 2009, Trump filed a new suit against the developers to collect unpaid settlements of $13,448.35 from each, citing the personal guarantees they had signed.
The Riverside property was foreclosed on in 2009, then sold in 2015 for $12.1 million to a local developer, who announced his own plans to build “an iconic” 50-story tower — “the best building ever built in the Tampa market.”
Today the site remains vacant, a weedy, fenced-in lot along the Hillsborough River.
Additional reporting by Katherine Sullivan.
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